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tv   [untitled]    December 6, 2011 10:30am-11:00am EST

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i am. this is almost all the votes have now been counted in russia's parliamentary election with a united russia party in the lead but still suffering a loss of popular support meanwhile people on the with the outcome of protests in the capital center the police intervening when the march move the only all rise venue for downtown los gatos towns to. faces its biggest threat yet is the entire year is in place is a regime downgrade an announcement that sent global markets agreeing that this is
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the need is a last ditch attempt to save the troubled currency at a meeting in brussels on thursday. and for her she ruffling without tons of radioactive and new to lead from the japanese nuclear plant that was hit by the earthquake in march there on fears that toxic fluid may have found its way into the pacific ocean over the weekend. objects max. fresh air force and salacious scandal in the money well that's in the report up next. max kaiser this is the kaiser report the word is supra national super national you know that word means it's the new word all over europe it's really important it means loss of sovereignty and all kinds of bad stuff but let's get
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more details from stacey or max kaiser merkel pushes for european fiscal union the article points out what does fiscal union mean exactly there are different interpretations apparently max merkel once the european commission to have a veto over countries tax and budget plans whereas the french want national parliaments to be involved but remember max in episode two seventeen of the kaiser report we could at the least a palace speaking on behalf of nicolas sarkozy he said quote the president has in no way the aim of giving super national powers to the european commission we want to discuss the ways of creating more intrusive powers for brussels to monitor countries such as greece. right it's all being kicked up stairs to super national powers yes but only for certain people they're the jim crow laws being applied towards the e.u. there are certain people they commit crimes they're bad they get thrown in jail
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others commit crimes they get bumped up to the headquarters of oh greece they run greece or they run italy you know they get appointed to positions of extreme power once they commit big enough crime but ok so you're making an interesting point there are other words as they move the fiscal and monetary facilities up a notch to supernational powers they're also abandoning all the local laws governing various countries would create some kind of justice system within those countries are moving toward a two tier system both financially and all across the legal spectrum entirely germany and france won't have to give up their sovereignty but greece italy portugal spain certain people will there's a two tier europe emerging just like we see within each society where the one percent is taking more and more of the wealth never having to pay for their own mistakes and we see that max with france and germany in this case their banks have been more reckless than almost any other banks across europe and yet their banks
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are constantly being bailed out and yet their countries have to never give up any of their sovereignty french and german banks the most reckless therefore their give up less of their sovereignty versus the rest of europe however there are even more reckless banks in the u.k. in the u.s. and i assume that they'll come in and destroy france and germany sovereignty at some point max you are talking about reckless lending well look at some feckless people here in this next headline feckless parents would only spend extra benefits on themselves in duncan smith the work and pensions secretary for the u.k. in duncan smith otherwise known as i.d.s. said the extra money provided to dysfunctional families may simply be spent on drugs or gambling rather than. helping children so we won't give them any more money and he's responding to this survey that says that there are one hundred thousand more children living in poverty now while the saudi fecklessness going to
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characterize the people as being fact was that the people who put you into office the people who pay your wage as a bureaucrat is misplaced obviously especially in the context of a city of london that has redefined fecklessness and irresponsibility to really incorporate a levels of wealth and larceny stealing that is almost unimaginable well let's go to google dot com and i'm going to check out what the definition of feckless is adjective of a person lacking in a fish in sea or vitality unthinking an irresponsible and synonyms proposed max powerless ineffective helpless. powerless that's important to know because these feckless people he's referring to are powerless they're the powerless people in society they're not the power full the power full of the ones that are reckless i was never a precipice and duncan smith character he's not even worth raging against the name
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george osborne yes david cameron maybe but an duncan smith thing such a minor player in all of this he should be on the backbench not even in britain he should be in the backbench and looked away as someone of the guy's a complete bureaucratic nobody well as i was saying that he was referring to these hundred thousand more children now living in poverty ministers claim that the official measure of poverty households earning less than sixty percent of the median income does not reflect a proper approach to tackling the problem it is now expected that the government will change the definition of poverty but always is the case where we're living in a revisionist age where if a bank breaks the law they change the law if the government is failing to do what they were elected to do they change the definition of what it is they're supposed to be doing or they change the statistics that they are reporting to somehow reflect them in a better light then they get murdoch is completely corrupted to propagandize all this fake information from the government and all these fake statistics and all
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these new redefinitions and revisionism and no wonder people are sitting there back home thinking about you know what within five minutes from now i could be looting that liquor store and walking away with fifty pounds that i deserve and now let's again look at this to tear system that we see around the world but especially in the u.k. ian duncan smith the government has saved more than one hundred million pounds in benefit fraud crackdown a quote from the article by ian duncan smith we prosecuted almost ten thousand benefit fraudsters in two thousand and ten eleven up from eight thousand two hundred the year before in all cases benefit fraudsters are required to pay back the money that they have stolen now max can you tell. me how many bankers have been arrested in the city of london. how many have been prosecuted. how many have paid back their ill gotten gains zero exactly and you can see that in this next headline money found in britain may belong to m.f.
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global about two hundred million dollars in customer money that vanished from m.f. global is believed to have surfaced at j.p. morgan chase and britain according to people briefed on the matter now remember ok they found two hundred million dollars that's the equivalent of one hundred twenty seven million pounds so here you have one hundred twenty seven million pounds right there on this it count. they haven't prosecuted one single person to try to get that money back instead in duncan smith prosecuted ten thousand brits to get back less than that twenty seven percent less than that regardless it is unclear whether investigators can recover the two hundred million dollars. slams ten thousand benefit claimants for stealing the equivalent of a soda pop in his imagination versus m.f. global and j.p. morgan which actually without any equivocation or doubt has right stolen millions hundreds of millions of dollars and duncan smith and all the other
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tory front benchers are sitting on their hands hoping that they get patted on the head from these bankers and thrown a little bone good job david cameron. that this quote marks from the article during m.f. global's last chaotic days the brokerage firm over drew an account at j.p. morgan some investigators now believe that the firm used customer funds to patch at least some of the hole which would have been a significant breach of federal law nobody at m.f. global including john chorus line has been arrested over in the u.k. authorities are looking into whether j.p. morgan initially question the source of cash and sought proof from m.f. global that it was complying with regulations now any of those ten thousand people prosecuted by irritable bowel syndrome any of those ten thousand had tried to transfer a thousand bucks to a bank account you can bet your bottom dollar that j.p. morgan would have interrogated them would have looked every single orifice to try
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to find out where the heck they got that money. i think it's a safe bet that they would be probing there or looking for that money because this is how in fact they make money they probe the globe's financial orifices and they root out all the detritus that they find there as collateral for five hundred trillion dollars which are the basis for jamie diamond's christmas bonus happy christmas well ok and now in duncan smith also said about these poor people that they're feckless and so we shouldn't give them any more money because only spend it on drugs and gambling and the same week of course we've had trillions of new liquidity introduced to the system for the banking class right because of course they're so sound and reasonable and sane with their money social media snake oil how much will you buy this is from your guest coming in this is josh brown downtown
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joshua brown this group on i.p.o. was discussed in scam designed by the underwriters to present the appearance of a hot deal so that they can get mark zuckerberg the tension for the real i p o coming next spring share counts were kept low for the media to see a pop and then backs were turned as the market cap was cut in half over twenty four days everyone involved should be ashamed of themselves what we've been covering this for weeks groupon is a ponzi scheme all the original customers have dropped out they need new customers to come in and none are coming into it so they went public there were a lot of people who tried to flip the stock you know hedge funds trying to flip the stock and not even the flippers are able to flip the stock fast enough it was such a catastrophe on the initial public offering all the underwriters involved including goldman sachs of course they got their investors in ahead of the i.p.o. knowing there was a ponzi scheme and now we're going to move on to another part of this game called zingo which is a virtual currency play that's a ponzi scheme of there's three more of these coming down the pike faced. but i
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would imagine by the time it goes public will be overvalued substantially i think goldman sachs thinks they're going to get one hundred billion dollars for this remember they got fifty billion dollars price when they brought in their customers even legally under the law but not that they have to comply with the law ever joshua brown goes on to ask as though coupons delivered electronically and unprofitably is some major advancement of human civilization worthy of being priced at five times sales are you people high so again even in duncan smith called these feckless poor people that they would just miss spend the money on drugs and here joshua brown is that these investors that chase this these crazy i.p.o.'s with no business model hire are these people high and of course they are they're high on fed cheap money on moral hazard they're high knowing that they're always going to be bailed out for their bad bets like the somali pirates of the right idea they
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loot the ships and then they sell shares in the next ship that they're going to loot on an informal exchange like a group own or a zynga or a facebook share market or shares post isn't like an electronic internet based market that only people who actually have a proven record of criminality aren't eligible to be involved with and they take those public the somali pirates so you know i returned to these looters in london just a few months ago using they need to take themselves public. london rioting looters ltd yeah they should go public on the alternative investment market the a.i.m. they should take themselves public they could raise like groupon or facebook they could raise a quick twenty billion dollars then they would go in and they would buy out let's say h.s.b.c. or barclays buy all these banks fire everybody and you know have your way with
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them whatever that means throw me out the window we don't care if they're useless at that point and just replace the entire city of london with real professional duders not these amateur looters having your way with them imply something different i think in the u.k. . well yes everything's slightly different in the u.k. because of all those public schoolboys as not ok stacey there were thanks so much for being on the kaiser report thank you max don't go away downtown josh brown after the break so stay right there.
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welcome back to the kaiser report imax keyser time now to go to new york city and speak with josh brown of the reformed broker dot com josh also works with barry ritholtz over at fusion i.q. an online quantitative research firm josh brown welcome back to the kaiser report thank you for having me great to be on the right josh brown you write quote this group on i.p.o. was a disgusting scam tell us more well if you just look at for starters the structure of how they concocted it the whole goal was to present an image that this was a quote unquote hot deal how they did that was they limited the amount of shares they were going to allow to trade and this enabled them to get a much higher price
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a much higher valuation upfront it created an artificial sense of scarcity led to investors chasing it on the first day they got up to thirty last time i looked at it it was fifteen or sixteen bucks and we're talking about twenty five days afterward i.p.o. day so essentially it was two percent a day from the day came public and the only reason that was able to happen was because they priced it way too high and they made it way too scarce or artificially scarce and i think it's just indicative of the fact that these games contain to be played nobody is at all cowed or humbled by anything that's gone on in since the credit crisis well what struck me about the group on i.p.o. is something remarkable in that something like eighty five percent of the original investors had sold out almost all of their stock. before the i.p.o. typically an i.p.o. is when insiders or venture capitalists have a chance to cash out some of their money but in this case almost all the money was
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already cashed out the c.e.o. cashed out for over a billion even before the i.p.o. this seems to be a new chapter in the i.p.o. scandals going back decades without a doubt there's something called second market that you know in theory is a good thing because it's providing liquidity to early stage companies it's allowing people to trade shares with zero s.e.c. oversight on of the exchange where regular investors are not permitted to tread it's really only people that are qualified to be there whether by virtue of how high their net worth is or whether or not they were an insider in one of these companies so essentially they were arranging for buying and selling in a market that is not an f.c.c. registered market like the new york stock exchange like the nasdaq now there is a good part of that but there is a bad part of that the good part of that again it facilitates liquidity it allows for early stage companies that ostensibly could be job creating companies like
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facebook to have employees be able to buy and sell shares the downside of that of course is that dirty money has got involved the dumb money is going to follow them in and what you going to end up seeing is a situation where essentially we have shadow markets once again where only via lete the privileged few are able to take advantage of everyone else i think if you look at groupon as an i.p.o. it's barely an i.p.o. they sold four point one percent of the company to the public which is it may as well not even be public and again as you pointed out a lot of the early investors a lot of the wheeling and dealing had already gone on prior to the listing the sole purpose of the listing in my opinion was to get a big high valuation for the company to make people feel better and to get mark's ochre brogues attention so that the morgan stanleys of the. world have a shot at getting the facebook i.p.o. they want to basically say see what we're able to do when it's your turn to hire us
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so it was almost like an advertisement brayer get to that facebook i.p.o. in a second but i want to talk about this group on a little bit more so on the on the subject of i.p.o. scamming and scandals you know it was only it ten years ago or so during the dot com bubble and burst that a lot of the scandals were revealed i remember frank quattrone i believe is a credit suisse at the time was caught laddering an i.p.o. stock he's back by the way ok so at the time i believe he got off in front of a jury because his argument was that my crime is too complicated for the average jury to understand therefore i'm innocent that's what brilliant yeah and so laddering an i.p.o. this is of course when the bank taking the company public will participate in that secondary market being a buyer in the market creating an artificial price stimulus to bring in more suckers i don't even higher price all the while they're playing games on the back end but what about the financial press because i know like business insider which
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has got to be the most widely read internet business site these days that was really a cheerleader for the stock mean henry blodget wrote a couple of pieces that seem ambivalence about it he was saying well there's maybe it's a ponzi scheme maybe it's not a ponzi scheme clearly it is a ponzi scheme but isn't there are some responsibility for outlets like business insider for having participated in this massive rip off let's take the two issues separately if i can the first is it or not a ponzi scheme it's appends on how you want to define ponzi scheme essentially the way groupon is operating is they're taking in money from merchants you know from the sale itself and they're not paying out the merchants for sixty to ninety days that sixty ninety day window where they're holding on to the cash allows them to hire more people bring their services in the other cities so they're creating growth just by virtue. of the fact that accounts payable haven't gone out yet so the only way this thing continues to grow is if they can roll out into more and
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more and more of cities at a certain point you hit a limit where there aren't enough merchants that are interested in participating there aren't enough people willing to take the coupon and use it or there aren't enough people that are willing to be employees of group on a new city sold to bit lee we know the schools will hit the wall exacerbating that fact you've got a lot of competitors there was zero barriers to entry facebook will get into this game amazon already is they're back and living social there are going to be fifty different group on clones all over asia so you know they have this head start they kind of have this name brand recognition but they have to essentially act like a ponzi in order to keep that level of growth i don't think they were intentionally trying to play accounting games at the company i just think it's a poor model but to put that aside does business insider have any kind of responsibility whether or not they're going to cheerlead it i don't know i don't know that we're calling them journalists i have friends over there henry's
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a friend joe wiesenthal's a friend i think what they do is they present every viewpoint so if henry saying something positive about groupon and they're doing sixteen hundred articles every three days it's pretty you know it's pretty certain that someone else blogging for the site whether it's an outside contributor like myself or one of their internal. bloggers is going to write something that's a counterbalance yeah let me a follow up on a couple of points first of all in the case a group on the original merchants who participated something the rate of repurchase a patient is falling down to zero so this is but also indicative of a possible ponzi that's my point in other words you need new zealanders to make this work if the original merchants found this to be a valuable service they sign up again and this would be a viable model but they're not. and this is been clear now way before the i.p.o. and second of all regarding blodget at business insider i mean here's a former institutional investor i don't know if he ever made it to their all-star
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list but he was certainly a big wheel on wall street he and mary meeker were the two primary dot com analysts in the ninety's who were really the x. in the dot com space is a reputation for knowing better i don't know if i buy the fact that we can just assume that the doubt that he's just a blogger who doesn't know you know any better in blodgett's defense they're not selling securities at business insider right but they are selling quasi i research but ok we'll let him speak for himself i invite him on the show again let's move on what the former treasury secretary hank paulson formerly of goldman sachs tipped off some hedge fund managers also formerly of goldman sachs about then pending nationalization of fannie mae and freddie mac. and there's a lot of price action in those two stocks and a lot of people made a lot of money and inside information your thoughts first of all what the hell did did hank paulson think his job description was in the summer of two thousand and eight i mean i've heard that question asked by others that's really what is he doing is he using these x.
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golden knights who he trusts as intelligent people as a sounding board is that why that meeting is taking place because i can imagine it's explicitly a meeting about guys here's what you need to know is about to happen i genuinely can't imagine that anyone would be that stupid especially someone who is a who is an insider for so many years at an investment bank they all know the rules i don't know and i don't know if anyone knows whether or not the hedge funds that were in that room were others that may have communicated with them placed in the trades based on that in fact in one case one of the hedge fund managers called his attorney the attorney said don't trade but here's the deal when you talk fannie and freddie you're talking about paper bonds and preferred stock and common stock that everyone on wall street has some kind of exposure to in other words. you don't have to walk out of that meeting with hank paulson here that fannie and freddie were in that much trouble and short fannie or freddie securities in order to express that
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viewpoint you can short any of the regional banks whose balance sheets are stuffed with fannie and freddie bonds and preferred stock you can short any of the money center banks there are a lot of different ways you could have traded better so indirect that it would be impossible to trace whether or not you took action on that so i don't know if this is going to be something that we just say oh this is how it works nobody is surprised or if there's actually something where you know regulators are going to take action i i just have no way of knowing and i don't think we know what those hedge funds did on the heels of that meeting it's disturbing either way maxwell we know that paulson is former head of goldman sachs or co head of goldman sachs has at least some familiarity what they rules as stipulated when one acquires a series seven brokers license exam was passed to acquire the license but you know i mention that because john course signed who just committed massive fraud in m.f. global apparently he didn't even have his brokers license renewed he went into that
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job without adding an actual license to do that job any thoughts on the end of his little boy is the end for his grandfather and he's not great with other and has no need to lies those lies is expire that renewal every two years how do you see that playing out the m.f. global scandal josh brown we don't yet know if it's massive fraud a lot of the money that they said they were having trouble recovering. the counterpoint to that is it's not that it's fraud it's that the books are a mess and the accounting is a mess and we'll find it we don't know yet i have clients that have been affected because they've been trading gold futures and things with m.f. global away from me so i have heard about frozen funds and of course it's horrendous the other thing that corps and defense will point to and it's amazing how these guys can find the one loophole that allows them to blow themselves up they really ought to be cragin. and for this it turns out that you can comingle customer funds with the funds of the firm in only one specific instance and that is
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if you are involved with the securities of a sovereign issuer whether it's a u.s. treasury bond or european so in that specific case only can there be i know they don't use the term commingle but that's basically what they've done so it turns out that they are so brilliant that they found the one loophole that would destroy the entire franchise within six weeks all right so listen we we're out of time before i go i want to tell people about your twitter feed because it's very active and it's full of great stuff and aside from your website reform broker which is also good but your twitter feed what's your twitter handle again it's at reform the broker all right we're out of time thanks so much josh brown for being on the kaiser report thank you that's all the time we have for this edition of the kaiser report with me max kaiser and stacy herbert our thank my guest josh brown you can follow josh on twitter at reform broker and you can follow us on twitter on facebook or kaiser report or you can send me an e-mail kaiser report at r t t v are you until
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next time this is nice guys are saying bye y'all. are unknown.
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